Is it Time for Your Business to Accept Bitcoin?

Takeaway:
Bitcoin is still considered strange by a lot of companies, but a number of small businesses have decided to take the plunge.

Bitcoin’s rise has been a turbulent one, from its staggering value peak in November 2013, to the bankruptcy controversies surrounding embattled bitcoin exchange MtGox. This hasn’t stopped a number of major businesses from embracing the cryptocurrency though, such as Square, the e-merchant site founded by Twitter co-creator Jack Dorsey. Then, in early April 2014, the Chicago Sun-Times embraced bitcoin, becoming the first major newspaper to do so, and while Amazon remains reluctant to follow suit, the growth of bitcoin as a legitimate currency for business isn’t slowing down. This includes small businesses. So is it time for more small businesses to get on board?

Small Businesses on the Cutting Edge

Why would a small company decide to accept bitcoin anyway? According to Robert Podfigurny of Lerentech, a Web design and SEO firm based in Syracuse, New York, it's because they want to be a proponent of new technologies and the future of financial transactions.

"We want to create as many options for our customers, for them to pay the way they want to pay," he explains. Lerentech provides Web design services, and Podfigurny explains that for a long time, companies would request PayPal functionality on their sites. Now, adding bitcoin is a new request that allows companies to provide as many options as possible."

Zach Harvey, CEO of Lamassu, the company behind the world’s first bitcoin ATM, says companies stand to gain from the lower fees for online transactions and the ability to avoid credit card fraud. He goes on to explain that small businesses that embrace bitcoin will be well positioned when the currency grows in the future.

"Businesses that start accepting bitcoin now will also be ahead of the curve and will be better prepared when bitcoin becomes mainstream," he says.

"It’s a trending technology," adds Joanan Hernandez of Mollejuo, a mobile app developer specializing in travel that accepts the digital currency as payment. "We don’t want to miss potential customers using this cryptocurrency.

"Some countries have currency controls; this is non-existent with bitcoins, thus allowing people from those countries to engage with our services."

Getting Started With Bitcoin

Many companies may feel daunted by the prospect of bitcoin and getting set up to accept it as payment. A Harris Interactive study released in March 2014 showed that while 48 percent of Americans are aware of bitcoin, only 13 percent trust it enough to invest in it. Even so, overcoming the fear of the unknown may benefit business, at least according to the many companies that have embraced the currency.

Finding a payment provider is the first step. "I would suggest signing up with a bitcoin payment provider, such as BitPay or Coinbase, but any business with a smartphone or tablet could immediately start accepting bitcoin just by downloading a free bitcoin wallet app," says Zach Harvey.

The biggest issues that businesses will face with bitcoin will be understanding its volatility and how to secure funds, Harvey says.

Cold storage is the best method of protecting your bitcoins. This involves storing the majority of your coins - or savings, if you will - on a device that is disconnected from any network, where no malicious entities can access it.

Hernandez adds that saving bitcoins can be a risky move. "As it stands today, saving in bitcoins is a very risky operation. [It’s] safer to convert the bitcoin immediately to normal currency as soon as the transaction is finished," he says.

Making Bitcoin Accessible

There are many ways of bridging the gap between customer and merchant when it comes to cryptocurrency. Businesses can accept bitcoin directly by using a service like Blockchain, which can be more time consuming but with higher profits. Most companies opt for a third-party service that handles the transaction.

With this in mind, Lerentech has searched for a way to make it easier to accept bitcoin. The company develops mobile apps and is currently testing an app that allows retailers and restaurants to accept bitcoin in their stores, rather than credit cards. At time of writing, the app hadn't been released to the public.

"It translates instantly, showing the value of the bitcoin in dollars. The conversion is done through the Web in real-time currency value," says Podfigurny. "Then they can hit 'accept' and the customer is shown a QR code, and using any number of bitcoin apps - such as Coinbase or Blockchain.info - they can scan that QR code, see the total that they see on the screen in front of them and hit 'payment.'"

The staff member can then see that the transaction has been started, and within a few minutes, the money goes out of the customer's bitcoin wallet and into the wallet of the recipient business. The business can hold on to those bitcoins or go straight to an exchange and convert them to U.S. dollars. It's apps and technologies like these that will make bitcoin a more practical medium of exchange from a vendor standpoint. (Some argue that bitcoin won't make it as a currency at all. Read more in Will Bitcoin Survive? 5 Factors From Each Side of the Debate.)

What Are the Obstacles?

So what are the obstacles for businesses looking to accept bitcoin?

"The fact that it’s new and different," says Podfigurny, adding that educating the general public on bitcoin will help it grow.

Businesses also may fear the repercussions for customer interactions. How will companies handle disputes and refunds?

"Reimbursement is not straightforward," says Hernandez. "No money back procedure is. Once a person pays you, you better deliver! Bitcoin wasn’t designed to have such a thing as reimbursement, so we can’t expect this feature from the cryptocurrency."

Zach Harvey’s approach doesn’t differ from traditional online purchases. "For customers, they have to rely on the reputation of the business, but that’s the case as it is," he says. "For instance, if you want to be on eBay, you have to comply with their set of rules or your reputation will be harmed."

Bitcoin is just over five years old and has endured some turbulent volatility. The next few years will determine if it takes off on a wider mainstream scale, and some are more optimistic than others.

"As we always say, it remains to be seen if bitcoin is going to survive this new era," says Hernandez. "Nevertheless, if it crashes and burns, immediately there will be another cryptocurrency waiting to take that place; cryptocurrencies are here to stay."